No more exemption from capital gain tax

ISLAMABAD The revenue-hungry government is actively contemplating to increase the rate of taxes on stock exchanges even before the end of the current financial year on June 30, 2010 when it would withdraw exemption on capital gain tax, as well. A senior revenue official told TheNation on Tuesday that the government would not extend the exemption on capital gain tax on the stock trade beyond the current financial year. Local bourses have been enjoying exemption on capital gain tax for the last decade or so. The successive governments exempted the tax on capital gain drawn from the shares in a bid to provide incentives for short-term portfolio investments. The stock exchanges are already paying 16 per cent Federal Excise Duty on each transition of shares both sale or purchase. Moreover, the income of individual brokers, corporate brokerage houses, and that of their employees is taxed under the normal income tax mechanism. Although the government has categorically declared that there would be no more exemptions on the taxes from the next financial year, the brokers community is seeking extension in the exemption for another year. According to the brokers, the equities market at the current juncture of time direly need support in terms of incentives be that in the form of tax exemption. More than the brokers, they added, it was an incentive for the investors. According to the brokers, the higher interest rates at present have been luring investments to fixed income securities as against the equities that also carry a risk factor. It is true that the Pakistans stock market has been yielding average 10 to 15 per cent return on investments during the last decade or so, a broker observed requesting anonymity. Now when the market is faced with a variety of external deterrents including political uncertainty, and the law and order situation in the wake of the ongoing war on terror, incentives like the exemption on capital gain tax was direly needed to maintain the confidence of investors, he added.